The Public Policy Issue of Our Time

By |April 23, 2010

The Public Policy Issue of Our Time|A story in today’s LA Times shows how the vexing issues surrounding public-sector pensions are here to stay.

It’s an issue that won’t go away now, or seemingly at any time in the foreseeable future: public employee pensions.

The LA Times delves into the issue today, detailing just how pervasive and vexing the issue is for governments everywhere, from megacities like Los Angeles to tiny school districts.

There are no easy answers, as the story shows:

On Thursday, pension consultant Girard Miller told California’s Little Hoover Commission that state and local governments have $325 billion in unfunded pension liabilities, which he said amounts to $22,000 for every working adult in the Golden State.

“In California we had the Internet bubble, we had the housing bubble, and I see in the very near future the public pension bubble,” Gov. Schwarzenegger said this week. Confronting the pension crisis, he said, should be the state’s No. 1 policy priority.

If the problem is not addressed, the burden for funding government employee pensions would fall to the state’s taxpayers. Many elected officials are advocating a reduction in benefits mostly for new hires to stave off tax hikes – setting up a collision course with the state’s powerful public employee unions.

“When you have men and women standing side by side in extremely stressful, hazardous, grueling situations over the course of a career, it’s hard to look one or the other in the eye and say your future security matters less,” said Carroll Wills, a spokesman for California Professional Firefighters, which represents 30,000 state public safety workers.

Wills said state employees are taking the fall for the Wall Street financial crisis, which bludgeoned the stock portfolios that help fund pensions.

“We would argue that reforms like this basically are hitting the little guy for what the big guys did,” he said.

Others contend that the typical pensions enjoyed by the public sector have simply become too expensive and have largely been abandoned by the private sector in favor of 401(k)-type plans in which employees build a nest egg but can’t count on monthly payments for life.

Politicians say pensions are the biggest challenge facing the state. But solutions — like lower benefits for new hires — don’t exactly erase unfunded liabilities overnight. They just control them in the future. Higher taxes to level the costs out aren’t exactly politically feasible given the economy. And even if every public employee was let go, it still wouldn’t erase the unfunded.

Some labor leaders say the new tiers — meaning lower benefits — for newly-hired workers along with future gains in the market should help the pension liability smooth out. Others say those kinds of stock rallies may not show up.

In essence, there are no easy answers.

You can count on us keeping a close eye on the issue in our reporting. And we also hope to learn from those of you who know the issue. So reach out. Please email me at dwashburn@voiceofoc.org with your thoughts about how we can help educate Orange County about this and other public policy issues.

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